As a real estate broker specializing in care home sales, as well as a CPA, I am frequently asked by clients how to “improve the bottom line,” or, increase net operating income. I’m often surprised that many care home owners do not timely prepare monthly operating statements, or, P&Ls.
We cannot stress the importance of compiling monthly P&Ls as soon as possible after the end of each month. We advise clients to review each line item, and compare with prior months. Analyze areas of uncontrolled expenses with an eye to improving net income. If you can lower your expenses by a few hundred dollars every month, over time, that will lead to a significant nest egg to feather your retirement account.
An area of possible savings is energy costs. Clients tell us that their electricity bills can run anywhere from $300/month to over $1,000/month during the warmer months. Just the sheer body heat of so many residents under one roof raises the overall ambient temperature of the dwelling, necessitating more energy usage than a typical single-family home of comparable size and number of levels.
One option is to consider going solar. While we do not endorse any particular provider, clients tell us that they have saved considerable amounts on their monthly energy costs. We estimate that 20-25% of our care home clients have taken the plunge. But how do you know going solar will save you money?
If you’ve ever tried to compare quotes from solar installers, you’ve probably gotten a lot of confusing jargon and three-letter acronyms. Like any expensive home improvement project, you must compare and get quotes from installers and do your due diligence.
Needless to say, solar is a big-ticket item, and you want to go with a reputable company. How do you get a good installer? Ask friends, family and other care home owners for references, and also online sources, such as Yelp. Check the Better Business Bureau for each company. Look at online reviews and find out how long the company has been in business. Pay attention to the “gut” feeling you get from each installer.
How do you compare systems? First note, all installers will have the same incentives, and there are Federal solar tax benefits, currently a 26% investment tax credit on the cost of systems installed 2020-2022, if you purchase the system. The tax credit may be applied to your federal tax liability and can be rolled over 5 years. It covers the cost of the system and installation. Consult your tax professional for details.
Determine Dollars Per Watt
You can compare solar prices by first determining the best cash price, then find a good deal based on that, whether you decide to buy or lease your system.
The way you compare solar prices is to examine dollars per watt. If the quote is for 20 panels at 250 watts, that means it’s a 5,000-watt system. At $20,000, the price comes to $4/watt.
Then, compare equipment. Solar panels are all pretty much the same, unless you get maximum efficiency. You might not need maximum efficiency unless your roof has limited size.
The important component of a solar installation is the inverter, or, the piece of equipment that converts the sun’s rays into energy for your care home. There are several kinds of inverters:
- String inverters, which are best if your roof has full sun. They are not shade-tolerant, and there is no way to monitor the performance of each panel;
- Microinverters, which are a good option if a few of your panels get shading. In this case, your other panels would still be producing power your care home can use;
- Optimizers, which function like microinverters, and may be cheaper.
Check the warranties, and the company’s policy regarding service and repairs for each system. Solar systems are relatively maintenance-free, and the only component in a system that is likely to need replacement is the string inverter.
Compare financing options, whether a cash purchase, financing or lease. Interest on such loans is tax deductible, in most cases.
- A cash purchase is the overall cheapest over time.
- There are numerous financing options for solar systems, including home equity loans, PACE loans, bank loans, and loans from installers. The important items to compare are the terms, interest rates, origination fees, and any escalation or prepayment fees. You will pay more for a loan than a cash purchase, and will own the system at the end of the lease.
- Lease or PPA (Power Purchase Agreement) will cost you the most over time, but you will be saving from Day 1. Leases and PPAs are difficult to compare, since there are so many variables. Determine the best cash deal you can obtain, then decide whether the lease is right for you. You won’t own the panels at the end of the term. And a lease or a PPA does not qualify for the federal solar tax credit. But as a business, remember, the cost of the lease is tax-deductible.
Going solar may or may not be the best option for your care home, but it is worth considering, as the savings may be substantial. When choosing the financing option that is best for your care home, also take into account your time horizon for owning the home, and the added value of a home with a solar installation.
We have encountered issues of care homes with loans, leases or PPAs, when the owner wanted to sell the home. In this case, address the issue early in the negotiations stage, before the care home purchase agreement is finalized, and make sure your buyer is willing and qualified to assume the loan or lease.
By comparing the costs and terms of several highly-rated solar installers and discussing the tax benefits you will realize from a solar installation with your tax professional, you will be able to make an informed decision about the potential cost savings and benefits for your care home.
If you are considering buying, selling or leasing an RCFE, please call us TODAY to explore your options. We would be delighted to evaluate your business and provide price guidance. We will help you obtain the highest possible price for your RCFE.